Smart-TV Space May Never Take Off as Predicted

Internet-connected TVs, often referred to as smart TVs, were supposed to be the Next Big Thing. But so far, they’re more promise than reality.

A combination of factors, including a lousy economy, lackluster products and consumers more than a little hesitant to buy yet another gadget, have conspired to stall the adoption of smart TVs. The technology is faltering so badly that many electronics firms are reining in plans to offer it.

Viewsonic, for instance, just nixed plans for a Boxee-powered smart TV set and says we won’t see it anytime soon. The company showed off a 46-inch set earlier this year at CES and said we’d have them by the second quarter. But now the company says in a statement:

“’Smart TV’ has not achieved the consumer acceptance or market expectation… that was forecasted over the last couple years. In addition, consumer spending for Smart TV’s in general has experienced a significant slow down as the economy has slowed. Our current strategy is to stay involved with the various technology developments and consider them in the future as they become available.”

“What’s happening in the connected TV space is it’s not really about what consumers want, it’s about what manufacturers are making,” Forrester principal analyst James McQuivey says. “Simply having a connected TV doesn’t mean you’ll actually use it.”

Other analysts share a similar sentiment.

“In most cases consumers are buying a television with Internet connectivity as insurance. In other words, they are buying them just in case they need it in the future,” says Van Baker, a vice-president at the research firm Gartner. “Less than half of Internet connected televisions actually get connected to the Internet so clearly consumers don’t yet see this capability as a must have feature.”

“Over the next few years, connected TV will become a mainstream consumer technology. Its widespread adoption will not only be disruptive to the entertainment industry; it will also heavily impact the global advertising and marketing industries,” read a May press release outlining projected global shipments of connected TVs. By 2015, 43 million homes in the US are expected to have at least one connected TV.

But so far, evidence of a disruption is hard to come by. Logitech, for example, recently drop the price of its Google TV set top box, the Revue, from $299 to $99 to better reflect consumers’ perceived value of the product after customers returned them in droves.

Apple may be a notable exception to the trend, as there are persistent rumors that some sort of Apple TV set is in the works.

Many blame the lackluster economy for the slow adoption rate of connected TV sets. McQuivey blames the devices. He’s still bullish on the technology, but says the current crop of smart TVs are actually pretty stupid, lacking enough power to make them a truly relevant, transformative technology. Many people buy smart TVs, take them home, and then never utilize the connected features of the set.

The people buying these TVs tend to buy them because they are the best TVs on the market — not because they are connected. The people who actually use Internet connectivity capability do so for only a handful of tasks, like accessing Netflix, watching YouTube videos and maybe checking out photos on services like Facebook or Picasa.

“Nobody has designed these devices to be inviting, to work quickly,” McQuivey says, noting that Google is at least trying to fix that in the software space. The situation is entirely different from another product that debuted around the same time as the smart TV: the iPad. “We’ve found there are at least ten activities that 50 percent or more people do on their iPad, which is very unusual. The iPad beckons you to try these things.” And Internet connected TVs? Well, it’s a TV, so you mostly just sit there and… watch the TV.

And what about that Apple television rumor?

“I am 100 percent convinced that Apple rumor is true,” McQuivey says. “I’m also convinced Apple may never bring this product to market. If we don’t see one, it’s not because the rumor wasn’t true, it’s because Apple is convinced it’s too broken a market to enter.”

Apple would need to add something new in order for their smart TV to possibly succeed, and its options are to provide additional content (like when Netflix was added to Apple TV’s streaming abilities), or add apps. If they can convince major developers to create apps for the experience, McQuivey says, it may succeed.

It looks like Viewsonic may revisit the space when production become more affordable, citing ” future cost reduction of processing solutions” and “advancements as to the performance of streaming and decoding of digital media and cost” as technological developments they were working on in the meantime.

But there’s no point in pursuing smart TV development further if nobody’s adopting it.

“This will end up being one of the most successful flops in the history of consumer tech adoption,” McQuivey says.